The GBP/JPY currency pair surged over 0.5% on Tuesday, after the Bank of Japan took a small step towards discontinuing the years-long substantial monetary stimulus. The move came well short of expectations of some market players who had anticipated a larger policy tweak.

The BoJ left its benchmark short-term interest rate without change at -0.10% at its October policy meeting and also kept a 0% cap on 10-year bond yields set under its yield curve control policy.

Yet, the BoJ redefined 1% as a loose “upper bound” rather than a hard cap and also dropped a pledge to defend that level with offers to buy unlimited amount of bonds.

The long-term interest rate cap of 1% was adopted in July.

“The 1% is no longer a strict cap and so that means they will allow for JGB yields to rise above 1%. To some extent, this is as good as quietly allowing YCC to fade in the background,” Christopher Wong, currency strategist at OCBC, was quoted as saying by Reuters.

Meanwhile, in its quarterly outlook report, the central bank revised up its inflation forecast for this year to 2.8% from 1.3% previously, which exceeded its 2% inflation target.

As of 8:06 GMT on Tuesday GBP/JPY was gaining 0.73% to trade at 182.677. The minor pair rebounded from a fresh three-week low of 180.762, which it registered on Monday.

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